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Former investment adviser ordered to pay $423,000 in damages

The second shoe just dropped for a Cloquet investment and insurance adviser who was sentenced in Carlton County Court late last year on charges of insurance fraud and theft by misrepresentation.

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The second shoe just dropped for a Cloquet investment and insurance adviser who was sentenced in Carlton County Court late last year on charges of insurance fraud and theft by misrepresentation.

In a related civil suit, Steven William Schmidt, 57, has been ordered by Douglas County Circuit Court Judge Kelly Thimm to pay some $423,000 in restitution to the Superior woman he swindled over the period of 10 years.

The victim, age 62, first contracted with Schmidt to serve as her financial adviser after her husband passed away in 2002, including taking care of her finances and doing her taxes for her, among other things. Over the period of the next 10 years, however, she sensed some things didn’t make sense with her financial transactions, so she obtained an attorney. An investigation ensued that revealed Schmidt had stolen several hundred thousand dollars from her over that time period, according to her attorney.

After the resulting civil court trial came to a close, Douglas County Circuit Court Judge Kelly Thimm gave his oral decision on Jan. 5, and a judgment was filed in the Douglas County Clerk of Courts office on Jan. 30. The judgement stated Schmidt “intentionally, maliciously and fraudulently obtained property of the plaintiff causing $223,550.75 in compensatory damages and that the sum of $200,000 in punitive damages is proper under the circumstances.”

The payments add up to more than $423,000.

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In his oral decision, Thimm expressed little leniency for Schmidt’s actions.

“I have rarely seen such aggravated conduct,” said Thimm. “This was grooming behavior by Mr. Schmidt on (the victim) to get her confidence. To get her as a lonely widow whose husband died unexpectedly … to do what he wanted her to do.”

Thimm went on to say he believed Schmidt fabricated many of the transactions he talked the victim into signing off on, instead channeling the money into his own accounts for his personal use and later calling them “loans” after he was facing charges for his behavior, which Thimm charged was “highly malicious conduct.”

“This is some of the most egregious behavior that I’ve seen, and I’ve seen a lot of egregious behavior in my days as a judge and a prosecutor,” stated Thimm. “This takes the cake to some extent.”

Although attorneys for both the defense and the prosecution were allowed to deliver comments and rebuttals, in the end Thimm’s decision stood.

In November 2014, Schmidt was ordered to pay $110,000 in restitution to the victim as the result of criminal charges filed against him in Carlton County. Schmidt entered  an Alford plea - essentially admitting that a jury could convict him based on the evidence, but maintaining his innocence at the same time. He was found guilty on one count of felony theft by false representation and one count of insurance fraud. A count of theft by swindle and two counts of insurance fraud were dismissed as part of a plea agreement in the criminal case.

The Minnesota Department of Commerce began investigating Schmidt in October 2012, following a complaint from the victim, who said he had advised her to withdraw money from her annuities between 2004 and 2008, claiming he would use the proceeds for other retirement investments. According to the criminal complaint, the fraud bureau detective found a number of instances where funds belonging to the client were not invested but appeared to be used for personal reasons by Schmidt.

Under the terms of the plea deal, Schmidt agreed to pay $110,000 in restitution and a sentence of 90 days to be served on home detention with electronic monitoring. Schmidt will be on supervised probation for five years and cannot act “in a financial capacity for another person or business” as part of the conditions of his probation.

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If he successfully completes his probation, Schmidt ’s charges will be converted to misdemeanor instead of felony charges.

Schmidt had conducted business under multiple names, including Schmidt and Associates, Schmidt Consulting LLC and Schmidt Wealth Management. The most recent business was Safe Money Solutions, LLC, located in a home on the 600 block of North Road in Cloquet. According to the Better Business Bureau website, Safe Money Solutions offered financial services for post retirement, estate and annuities.

The Department of Commerce previously held a separate licensing hearing regarding the allegations, which already resulted in Schmidt losing his insurance producer license for the state of Minnesota.

Schmidt’s attorney, Robert Mathias of Duluth, said in a telephone interview on Tuesday that he plans to appeal the civil case in Superior on the basis of two salient points. First, he said the money awarded in the civil case is “a redundant award,” claiming that Schmidt had already agree to pay back what he was charged with taking from her and to which she had agreed.

“No one is entitled to double or triple that amount of damages,” said Mathias.

Mathias further stated that he believes the punitive damages awarded in the settlement were out of line.

“Mr. Schmidt has no job and no ability to pay back that amount in addition to what he has already been ordered to do,” said Mathias. “Punitive damages in the state of Wisconsin have to be based on the person’s ability to pay.

“We think the judgement is a hometown verdict,” he continued, “which often happens in the city of Superior. It’s a widely known fact in the legal community.”

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Mathias went on to say that he still has a high regard for Thimm, despite the unfavorable judgement.

“He’s a reputable judge - but I think his decision in this case was off base.”

The victim’s attorney, Dennis Cochrane of Marcovich, Cochrane, Milliken, Swanson and Kropid in Superior, stated this week that he is equally committed to seeing that his client collects the compensation she has coming to her.

“The judge saw the evidence and understood it very clearly,” attested Cochrane. “He made his decision carefully and thoughtfully and clearly saw that Schmidt misappropriated (the victim’s) money. He gave Schmidt lots of latitude to explain himself, and he came in with his decision based on the evidence presented to him.”

Cochrane said he believes the amount of the settlement was fair and just.

“(Schmidt) took her money and we are going to pursue it on behalf of our client,” he concluded.

Related Topics: CLOQUETCRIME
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